Regulatory System of M&a in India
Name Roll No. Course Subject
: Amit Saini :2 : EPGDIB 2010-12 : Assignment – Mergers & Acquisitions (3rd Sem)
Regulatory Framework for Mergers & Acquisitions in India
Overview M&A transactions are primarily regulated by the Companies Act, 1956 (‘Companies Act’). Sections 391 to 396 of the Companies Act govern schemes of arrangement and mergers etc. Section 494 of said Act provides for an alternative form of reconstruction where a liquidator is empowered to receive shares etc. in lieu of cash for the transfer of the whole/part of any undertaking. Certain restrictions on the acquisition/transfer of shares are also found in Section 108A to 108I involving undertakings which produce, supply or control 25% or more of the total quantity of relevant goods or services produced or rendered in India. Special norms for Producer Companies (i.e. companies having objects involving farmers’ produce) have also been stipulated. The Companies Act stipulates inter alia that in the case of transaction involving merger of companies, the transferee company should be a company incorporated under the Companies Act. In other words, the transferor company could be a company incorporated in India or outside of India, but the transferee company should be a company incorporated in India. The Securities and Exchange Board of India (‘SEBI’) Act, 1992, and the guidelines/rules/regulations made thereunder govern M&A transactions involving public companies listed on a recognized stock exchange. In particular, the SEBI (Substantial Acquisition of Shares and Acquisitions) Regulations, 1997, (‘Takeover Code’) regulates transactions involving acquisition of shares that are traded over the stock market (but exempts schemes of amalgamation approved under the provisions of the Companies Act). The Listing Agreement that companies enter into with recognised stock exchanges are relevant in M&A transactions in case of a merger of a company listed on the stock exchange(s). The Listing Agreement requires
: Amit Saini :2 : EPGDIB 2010-12 : Assignment – Mergers & Acquisitions (3rd Sem)
Regulatory Framework for Mergers & Acquisitions in India
Overview M&A transactions are primarily regulated by the Companies Act, 1956 (‘Companies Act’). Sections 391 to 396 of the Companies Act govern schemes of arrangement and mergers etc. Section 494 of said Act provides for an alternative form of reconstruction where a liquidator is empowered to receive shares etc. in lieu of cash for the transfer of the whole/part of any undertaking. Certain restrictions on the acquisition/transfer of shares are also found in Section 108A to 108I involving undertakings which produce, supply or control 25% or more of the total quantity of relevant goods or services produced or rendered in India. Special norms for Producer Companies (i.e. companies having objects involving farmers’ produce) have also been stipulated. The Companies Act stipulates inter alia that in the case of transaction involving merger of companies, the transferee company should be a company incorporated under the Companies Act. In other words, the transferor company could be a company incorporated in India or outside of India, but the transferee company should be a company incorporated in India. The Securities and Exchange Board of India (‘SEBI’) Act, 1992, and the guidelines/rules/regulations made thereunder govern M&A transactions involving public companies listed on a recognized stock exchange. In particular, the SEBI (Substantial Acquisition of Shares and Acquisitions) Regulations, 1997, (‘Takeover Code’) regulates transactions involving acquisition of shares that are traded over the stock market (but exempts schemes of amalgamation approved under the provisions of the Companies Act). The Listing Agreement that companies enter into with recognised stock exchanges are relevant in M&A transactions in case of a merger of a company listed on the stock exchange(s). The Listing Agreement requires